How can a webhost afford to offer $2 and $3 dollar hosting

Hi, I am going between all of these hosting companies and I notice all the big names charge what I would consider a normal price for hosting and the these newer sites charge the really low prices. I have looked into this and if a hosting company doesn't use its own noc center they are charged a monthly fee for colo or managed from places such as vdi or burst to name a few. and they are offered only a certain bandwidth and if they exceed this because of a customer they are charged a fee of anywhere ranging from 3 to 6 a gig and my question how can they affordf to offer 10 gigs of badwidth for $2.00. It doesn't compute